YANGON — Feeling confident that Myanmar will eventually privatize its water sector, Japanese trading house Mitsubishi corp. is helping local governments there improve their water infrastructure and management.
The water services market there is a potentially lucrative one, and the company is hoping its investment now will give it a leg up on rivals once it is opened to private businesses. Mitsubishi is using the experience it has accumulated in the Philippines to support the country’s efforts to deal with the numerous problems with its water system, such as rampant leaks and low collection rates for usage fees.
Foot in the door
In March, Mitsubishi signed an agreement with the Yangon City Development Committee, or YCDC, which supervises the city’s water services, on a joint water-survey project.
The project is aimed at lowering the ratio of so-called non-revenue water, produced water that is lost for various reasons, such as leaks or theft, before it reaches the customer. The ratio for Yangon is around 65%, the highest by far among major Southeast Asian nations. One major cause is aged pipes, which were installed more than 70 years ago when the country was under British colonial rule.
Part of the blame also lies with the YCDC’s poor management and lack of an effective fee-collection system.
Starting this fall, Mitsubishi will start a survey of some 3,000 households in Yangon to examine the condition of their water meters and spot any leaks. The company will also scrutinize the YCDC’s management and then propose to the municipal government a set of improvement measures.
During a signing ceremony, Yangon Mayor Hla Myint thanked Mitsubishi for its cooperation and said the city’s growing population needs a better and larger water supply system.
The Japanese trading house has agreed to bear the entire cost of the survey, estimated to be around 100 million yen ($969,740).
Mitsubishi’s ultimate goal in launching the project is to win a contract to build up Yangon’s entire water supply system, including infrastructure development and service operations, says Yukihiro Iwasaki, deputy chief of the company’s representative office in the city.
In Japan, water services are mostly operated by local governments, but in many other countries, private businesses sell water to households and companies.
In many developing countries, companies from industrial nations have built water infrastructure and provide water-supply services. Revenue from usage fees provides a steady return on their initial investments.
With demand for water surging due to its rapid demographic and economic growth, Asia is the hottest corner of the global market for water-supply services.
Japanese trading companies are playing catch-up with Western water giants like Veolia Group of France and General Electric of the U.S., which have already established a strong presence in the region. Mitsubishi has been especially keen to expand its water business, as indicated by its acquisition of an Australian water services provider in 2010.
Poised to compete
Debate on the privatization of such public services as telecommunications and power supply is raging in Myanmar, a country of 60 million people that has embarked on reforming its political and economic systems.
Mitsubishi is betting that the country will soon start considering the privatization of water services too. The company hopes the survey project will help to win the trust of the Yangon municipal government and put the company in a strong position when and if such privatization occurs.
Though Mitsubishi is likely to face competition from companies in neighboring Thailand and Malaysia, it is confident of its competitive edge, which it sharpened in the Philippines.
The Philippines privatized water services in its capital, Manila, in 1997. The city’s public water company was divided and sold off to two private-sector players. One of them was Manila Water, a joint venture created by Mitsubishi, the Philippines’ Ayala conglomerate and other partners.
At that time, the ratio of non-revenue water in Manila was also above 60%. But through years of steady efforts to stop leaks and make formal contracts with consumers, that figure dropped to around 10% in 2012.
Manila Water will provide support for Mitsubishi’s survey in Yangon.
The ratio of Myanmar’s population with access to running water is probably around 35%, according to an estimate based on data from Global Water Intelligence and Japanese trading firms. That is higher than Indonesia’s 30% but well below Thailand’s 80%.
The Myanmar government’s goal of raising the country’s water-access ratio to 80% means potential infrastructure investments worth hundreds of billions to several trillions of yen.
Source: Nikkei Asian Review